High-growth firms in the UK saw record levels of equity investment during the first half of 2017. Over £3bn of funding was poured in – up some 74.7% on the previous half year. The average deal was worth more than £5.5m.
According to co-founder of ed-tech firm Azoomee, Estelle Lloyd, ‘right now, the investment climate is favourable. There are many investors out there who are keen to put money into growing businesses.’
For many firms looking to grow quickly and for those looking to fund an international expansion, equity investment is the most obvious type of finance to secure.
But how do you go about securing investment? What are investors looking for? What are the pitfalls to avoid?
The Mayor’s International Business Programme, run out of London & Partners, helps high-growth companies to expand overseas via a 12-month programme of mentoring, corporate engagement, trade missions and workshops and events.
Their new report on Routes to Finance features high growth London scale ups who have successfully secured equity investment via angel investors as well as Series A and Series B funding rounds. Below is an outline of some of the lessons these companies have learned on their funding journeys.
Start researching your investors even before you need funds
‘Looking for funding when you’re running short of cash puts you in a weak negotiating position,’ says Simon Hay, co-founder of educational software firm Firefly Learning.
That means thinking ahead and having a clear strategy for your business. Start by researching the fund’s investment portfolio and track record; ask around to find out more about the fund and individuals involved.
Mayor’s International Business Programme company, Metail, raised its series A funding at a time when the co-founder and CEO, Tom Adeyoola, wasn’t actively seeking finance for the business.
‘The fact that we weren’t looking for money meant we could set out the terms under which we’d consider taking investment,’ he explains. ‘As a result, the A-series proved to be our quickest and easiest funding round.’
A $12m investment was led by TAL, with participation from several angel investors.
Find the right investor for your business
For Azoomee, another company on the programme which has secured £2.7m from angel investors, the key to successful raising is ‘finding a core network of investors that believe in you and your business’. Once you’ve found that, life becomes easier.
Simon Hay of Firefly Learning agrees. He spent six months looking for the right investor for his Series A round, eventually raising £4.5m from BGF Ventures, who led the round, and growth capital investor Beringea.
‘We were looking for patient investors, who shared our vision and values,’ Hay explains. ‘There’s a lot of capital in London, and every investor has a different risk appetite, and different expectations of the terms and timescales. You have to kiss a lot of frogs!’
Get your pitch right
‘You’ve got to make your pitch count,’ says Henrique Olifiers, co-founder of BAFTA-winning gaming firm Bossa Studios. They secured a $10m Series A led by tech VC Atomico earlier this year.
‘It needs to be a well-crafted, concise summary of what makes your business a high growth prospect. You don’t have long to impress a potential investor, so work out how to get your vision across fast,’ says Olifiers.
Alain Falys, co-founder and CEO of Yoyo Wallet is of the same opinion. ‘You’ll have to convince them that your business is special. And the only way to do that is to get in front of them and tell them your story.’
He should know – Yoyo Wallet has now raised £12m in a B-Series round, led by Metro Group. ‘Metro Group saw that our solution could have a meaningful impact on a wide spectrum of retail businesses,’ adds Falys.
And most importantly have confidence in your business! Mayor’s International Business Programme company, Antidote, secured initial seed and subsequent venture rounds, including an A and B series, totalling $15m. Most recently, Antidote secured a further $11m in a round led by Merck Global Health Innovation Fund.
From Antidote’s experience of venture funding rounds, Sarah Kerruish, Chief Patient Officer at the company, has some bold advice for entrepreneurs.
‘Don’t be afraid to approach the big investors,’ she says. ‘And don’t shy away from approaching the US investor community.’
The recent successes of UK start-ups have made US investors take note, according to Kerruish. ‘More and more British entrepreneurs are building the sort of scalable solutions that American venture capitalists are looking for. So be confident in what you’ve built, and go for it.’
For more information on the Mayor’s International Business Programme please see gotogrow.london.
To access the programme’s new report on Routes to Finance, please see business.london.
Image credit: Malochka Mikalai/Shutterstock